Semiconductor Content in Systems to Hit Record High

Increasing prices for DRAM, NAND flash, and other semiconductors and more sophisticated automotive electronics systems and industrial equipment is resulting in increased semiconductor content in electronics systems.

Average semiconductor content in a system will reach an all-time high of 28.1% in 2017, according to researcher IC Insights. The previous record high of chip content per system was 25.9% in 2010.

The researcher said chip content will rise as the global semiconductor market increases 15% to $419.1 billion this year, although the electronics systems market is expected to grow only 2%.

Bill McLean, president of IC Insights, said the disparity between the slow growth in the electronic systems market and high growth of the semiconductor market is due to the increasing value of semiconductors used in electronic systems.

For instance, the cell phone market is expected to be flat in 2017, and the automotive market will grow about 2%, while the PC market will decline by about 2%, said IC Insights. However, the dollar value of semiconductors used in phones, computers, vehicles, and other systems is rising and has been increasing for years. The average semiconductor content per system was 19.1% in 1997 and will hit 28.1% this year and increase to 28.9% by 2021, according to the researcher. From 2016-2021, the average yearly gain of semiconductor content will rise 0.8 percentage points.

In 2017, the increase in semiconductor content in electronic systems is primarily due to the “huge surge in DRAM and NAND flash prices and below average electronic system sales growth this year,” said McLean. The average DRAM prices increased from $2.45 in the second quarter of 2016 to $4.51 in the second quarter of 2017, while the average NAND rose from $2.60 to $4.00 over the same period, the researcher said.

Another driver of rising semiconductor content in systems is automotive. Electronics content in vehicles has grown significantly over the last 20 years because of the proliferation of navigation, infotainment, collision avoidance, back-up cameras, and other high-tech systems that use processors, microprocessors, sensors, power management ICs, and NAND flash.

“There’s a lot more memory chips on board in vehicles,” says Brian Matas vice president of market research for IC Insights. “Automobiles are going from 1 or 2 gigabytes of NAND to 8 gigabytes.” Some low-end cars may not have had any flash memory, but new models are being equipped with 1 or 2 gigabytes of NAND for backup cameras, electronic maps, and other systems.

Semi content in electronics systems rises

Semiconductor content per electronics system will hit 29% in 2019.

Electronics content in vehicles will continue to increase as more sophisticated systems will be installed in more vehicles. Such systems will require higher functioning, higher-value processors, microcontrollers, and memory ICs.

The Internet of Things will also help boost semiconductor content per system.

“With IoT there are a lot of sensors which are inexpensive devices, but there are also microcontrollers and processors,” which are costlier, says Matas. “Overall there will be a lot of semiconductors going into systems, so IoT could be a significant driver as we go forward.”

Cell phones will also contribute to semiconductor content in electronics systems. In many developing countries low-end, basic phones have been sold. But cell phone users in those countries will be upgrading to more sophisticated phones which have more memory and more powerful processors.

While semiconductor content in systems will rise through at least 2021, the increases in chip content won’t continue forever. “The trend of increasingly higher semiconductor value in electronic systems has a limit,” said McLean. Otherwise eventually at some point in the future, semiconductor content of an electronic system would reach 100% in theory, he said.

Semiconductor content growth in systems will likely have a “ceiling” of about 30%, but it is unknown when that will occur. “Whatever the ultimate ceiling is, once it is reached, the average annual growth for the semiconductor industry will closely track that of the electronic systems market-- about 4% per year,” said McLean.